The UK's top five banks have agreed to adopt remuneration reforms set out by the G20 in Pittsburgh.

UK finance minister Alistair Darling has announced that Barclays, HSBC, Lloyds, RBS, and Standard Chartered will comply with the Financial Services Authority rules on remuneration. The rules focusing on disclosure, deferral, and clawback are in line with the G20 agreement and come into force on 1 January 2010.

"In a competitive and international business it is right to make sure that our staff are appropriately and competitively rewarded for sustainable, long-term performance…all G20 nations have also committed to their implementation to ensure a level playing field,” said Mr Darling.

The measures apply to all senior executive officers and employees whose actions have a material impact on the firm’s risk exposure, including all persons discharging managerial responsibility (PDMRs).

Between 40 and 60 per cent of compensation will be deferred over three years and at least half of that will be held in the form of stocks and shares. Minimum bonus agreements will be limited to one year and poor performance will result in bonus payments being taken back by the bank  - known as clawback.

FSA penalties for non compliance will include banks being forced to hold extra capital.

Other key measures include: adopting independent board remuneration committees; compliance of bank policy with FSB standards and the FSA code; submission to the FSA of an annual compensation review; the creation of bonus pools to account for the full range of potential risks; pay based on a sound long-term capital base and the direct correlation of pay to risk for employees in the risk function without reference to the performance of other business areas.